All we want from watchdogs is competence

It has not been a good end to the year for some of our business watchdogs - or at least not for the Office of Fair Trading and the Competition Commission.

In the last days before the Christmas holiday began, both of these pillars of the business community were humbled. First, an appeals tribunal ruled that the Commission's case against airports operator BAA could be seen to be biased.

Then the OFT conceded defeat in its case against the banks for their extortionate charges for unauthorised overdrafts.

Both cases have been going on for years. Both have doubtless cost huge sums of public money, not least in fees to the legal profession. And both appeared to fail, not because the broad thrust of their case was wrong (in both examples, those handing out the rulings did so with apparent regret), but because the watchdogs have failed to focus on the details.

The Commission had ruled that BAA was a monopoly and insisted it sell several airports to increase competition. The appeals tribunal ruled that because one of the commission members was linked to a local authority that had shown an interest in buying one of BAA's airports, there was the chance it would be seen as biased.

In the case of the OFT versus the banks, the High Court ruled that the OFT did not have the power to judge whether charges were fair. However, many observers felt that had the OFT chosen to challenge the bank charges on lack of competition rather than fairness, it would probably have won.

Indeed, this is what the High Court itself seemed to imply, for it is true that unauthorised overdraft charges are not only very high, but are also uncannily similar for all banks.

In both these cases there is more than a hint of hubris. Both regulators thought that they had their cases sewn up, but a lack of attention to detail or indeed a disregard for sensible procedures has led them to humiliation. In the case of the OFT, the failure leaves thousands of bank customers bitterly disappointed.

Businesses and consumers deserve better than this. The Conservatives have promised that if they win power there will be a shake-up of financial regulation that could encompass the OFT.

Rearranging the furniture may work, but it seems that what is lacking in some quarters is plain humility and competence.

Asked what would be the big event of 2010, one professional share trader I spoke to replied: 'It will be whatever we do not expect.'

This is doubtless true, but even I am going to hazard a guess that one of the market-moving events of the coming 12 months will be a panic about sovereign debt (or, as most of us call it, government borrowing).

Britain's debt will inevitably be a big issue because of the General Election, but the UK is not alone in its indebtedness. Other countries owe even more. The brief panics that surrounded Dubai and Greece in the past few weeks might be just the early signs of a bigger crisis to come.

I would wager that at some point in the next year there will be an even worse drama about some country or another going bust, which in turn will send shockwaves through world markets.

So which government will it be? Greece again? Another Gulf state? What about California? The US state has enormous debts and if it were a country it would be the tenth-largest economy in the world. Credit markets rate it as one of the riskiest debtors among government bodies, slightly worse than Croatia, Bulgaria or Kazakhstan.

The US Government would doubtless feel obliged to rise to California's rescue, but the rows and the market panic involved would be a sight to behold.

So maybe California. Maybe not. On balance it is probably best not to try to guess where the next crisis will be, other than to say it will probably be somewhere we least expect.